Social Welfare and Pensions Bill, 2005

By Dorothy Hall,2014-05-18 02:22
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? 152(1) obliges Irish based cross-border schemes to abide by the social and labour law and information requirements and any investment requirements

    Social Welfare and Pensions Bill, 2005

Part 3 of the Social Welfare and Pensions Bill 2005 makes a number of changes to the

    Pensions Act 1990 (the “Act”). This note summarises the changes. The changes to the

    Act include amendments to the funding standard for defined benefit schemes. They also

    include those legislative changes needed to implement the E.U. IORPs Directive. All

    Directive implementation, including that by regulation, must be completed by 23

    September, 2005.

In the headings below, the initial number is that of the amending section in the Bill, and

    the second reference is to the section of the Act being amended.

Sections 27 and 28 [Definitions]

These sections define the pensions legislation referred to in Part 3 of the 2005 Bill, and

    adds some additional definitions to section 2 of the Act.

Section 29 [Section 7A of the Act]

    The amendment provides for the making of regulations specifying actuarial guidance

    notes issued for any purpose of the Act, and where any such guidance is specified in

    regulation, it cannot be altered without the consent of the Minister.

Section 30 [Section 18 of the Act]

These changes rectify some anomalies in the powers of the Board to investigate pension

    schemes. The changes are intended to ensure that the Board has sufficient powers to

    investigate potential problem schemes, and that the powers are consistent with the

    requirements of the Directive.

Section 31 [Funding standard]

    ? Section 41 of the Act is amended so that defined contribution schemes that pay

    pensions from the assets of the scheme rather than buying an annuity from an

    insurance company must prepare an actuarial funding certificate and otherwise

    abide by the funding standard.

    ? This amendment is expected to affect a very small number of schemes.

    ? The amendment to section 43 reduces the maximum period between actuarial

    funding certificates from 3? to 3 years to be consistent with the Directive. The

    date of the first actuarial certificate due after 22 September 2005 will be

    unchanged, and the new period will apply to any subsequent actuarial certificates.

    ? The amendments to Section 49 extend the grounds on which the Board may

    grant a scheme a period of more than three years to restore full funding. The

    amended section will allow the Board to grant an extension where the assets are

    less than expected due to investment market factors, or liabilities are greater

    than expected due to factors to be specified in regulations, or both. Applications

    for extension must be certified by the scheme actuary, and regulations can be

    made to require the actuary to comply with specified guidance.

    ? Section 56 is amended to enable regulations be made to require the trustees of

    defined contribution schemes to value the liabilities of their schemes. This

    provision is introduced to comply with Article 10 of the Directive.

    ? A new section 59G will make early retirement from defined benefit schemes

    subject to the consent of the trustees when the scheme actuary advises that the

    scheme would not meet the funding standard.

Section 32 [Small scheme exemptions]

    Small schemes are defined as those with less than 100 active and deferred members, consistent with the Directive.

    At present, schemes which were frozen prior to 1993 or which are being wound up may be exempted from the funding standard and from the obligation to prepare an annual report, annual accounts and, where relevant, actuarial reports. Sections 41, 55 and 56 are amended to limit this exemption to small schemes. This change is necessary to comply with the Directive.

Section 33 [Section 59 of the Act]

    This section is being amended to give the Minister power to introduce regulations governing scheme investment. The regulations will give effect to the requirements of the Directive governing investment, including, inter alia, the requirement that assets are predominantly invested in a regulated market, diversification of investment and other matters.

    Schemes other than small schemes will be required to prepare and maintain a statement of investment policy principles.

Section 34 [Trustees]

    A new section 59A will prohibit certain people from acting as pension scheme trustees. These include undischarged bankrupts, those who have been convicted of an offence involving fraud or dishonesty, and those in respect of whom a declaration has been made under section 150 of the Companies Act 1990.

    A company may not act as a trustee if any of the directors of the company would be prohibited under this section from acting as a trustee.

    The new section also requires the Minister to make regulations setting out the qualifications and experience that scheme trustees or their advisers must possess. The new section also provides for the making of determinations by the Board regarding compliance with the new requirements for trustees and provides for the removal of a trustee who does not satisfy the requirements.

Section 35 [Section 90 of the Act]

    A new provision is being added to section 90 which gives the Board power to apply to the High Court to prohibit the disposal of the assets of a scheme. Such an application can be granted where the Board has received a request from another E.U. member state

and the Court is satisfied that the prohibition is necessary to protect the interests of the

    members of the scheme.

This section is necessary to implement the Directive.

Section 36 [Pension scheme borrowing]

Section 36 provides for an amendment to part VI of the Pensions Act 1990 in

    compliance with article 18 of the Directive. This amendment prohibits schemes from

    borrowing or acting as guarantor for third parties. In addition, it provides the Minister

    with the power to make regulations to allow borrowing in prescribed circumstances

    providing such borrowing is for liquidity purposes.

Section 37 [Cross border schemes]

The Bill adds a new Part XII to the Act, dealing with cross-border schemes.

    ? Section 148 sets out definitions for Part XII.

    ? Section 149 requires Irish-based schemes to obtain prior authorisation from the

    Board before accepting any cross-border contributions. This follows the

    requirements of article 20.2 of the Directive. Small schemes which intend to

    accept such contributions must abide by all provisions of the Act and may not

    take advantage of any of the small scheme exemptions.

    ? Section 150 sets out the procedures for the Board’s revoking a cross-border


    ? Section 151 includes the information that trustees of Irish based schemes must

    provide to the Board before accepting contributions from any cross-border

    employer. This implements article 20.3 of the Directive.

    ? 152(1) obliges Irish based cross-border schemes to abide by the social and

    labour law and information requirements and any investment requirements

    applying to any scheme members in other states.

    ? 152(2), (3) and (4) deal with the enforcement of the obligations under 151(1).

    ? 152(5) gives the Board the powers to require ring-fencing of the assets of Irish-

    based cross-border schemes. This may be necessary if other States impose

    investment restrictions on members of Irish-based schemes employed in that


    ? Section 153 identifies the Pensions Board as the competent authority for the

    purposes of the Directive, and sets outs the obligations of the Board with respect

    to cross-border schemes based overseas with Irish members. 153(2) obliges the

    Board to inform the competent authorities of the Member State concerned of the

    provisions of Irish social and labour law with which the scheme must comply in

    respect of the Irish members. 153(5) gives the Board the power to, inter alia,

    forbid an Irish employer to contribute to a cross-border scheme outside Ireland

    where it is satisfied that the scheme is not complying with Irish social and labour

    law. Sections 153(6) and (7) provide for enforcement of any direction issued by

    the Board under subsection (5).

    ? Section 154 provides for regulations which prescribe those provisions of the

    Pensions Act that will not apply to Irish-based schemes in respect of overseas


Section 38 [Section 111 of the Act]

Section 111 of the Act is amended to extend the cooling off period for PRSAs from 15 to

    30 days.

Section 39 [Section 113 of the Act]

    This section is amended so that amounts of up to ?10,000 can be transferred from an

    occupational scheme to a PRSA without requiring a certificate of comparison and written

    statement. This amount is currently ?4,000.

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